Unable to set the Wallpaper on Windows 7 or Windows Server 2008 R2

Recently, we find an wallpaper setting issue on windows 7 and windows server 2008 R2.
You want to set a picture on the computer as a background and it doesn't work. And you can only change it to a solid color.
The following KB article was also tried, but the wallpaper never applied:

The "Desktop Wallpaper" Group Policy setting is not applied in Windows 7 or in Windows Server 2008 R2
https://support.microsoft.com/kb/977944

After some research, data collection and troubleshooting, we get a solution:
Please follow the steps below to resolve it:
1. Delete or rename the file
%USERPROFILE%AppDataRoamingMicrosoftWindowsThemesTranscodedWallpaper.jpg
 
Ø Open an Explorer window.
Ø Cick the left mouse button in the Address/Breadcrumbs box. It will change to a path.
Ø Copy the path %USERPROFILE%AppDataRoamingMicrosoftWindowsThemes and paste it in, replacing what's there. Hit enter.
Ø Explorer will go to the location of the file TranscodedWallpaper.jpg.
Ø Delete or rename the file TranscodedWallpaper.jpg..

2. Apply the wallpaper again.
In this way, wallpaper can successfully applied.

Some reference from technet forum:
https://social.technet.microsoft.com/Forums/en-US/w7itproui/thread/5b9e513a-d504-451d-a121-b4f94893d96d
https://social.answers.microsoft.com/Forums/en-US/w7desktop/thread/8d350714-8b71-4d29-b8fe-0f67707ce36e
https://social.answers.microsoft.com/Forums/en-US/w7desktop/thread/01494bc9-d184-4b64-9a93-4f0c7dd70d13
https://social.technet.microsoft.com/Forums/en/w7itproui/thread/3cd96e23-a057-4bd1-97bd-ae0aada90325

 

Edit: We have released a Knowledge Base article for this issue, see details in https://support.microsoft.com/kb/2504610/en-us